While I definitely think this looks like a good match for Yahoo, eBay has $3.1B in cash and short-term investments... that's a reasonable chunk of change. A good question would be "what would eBay do with $1.6B more cash?" (One would presume that eBay would write Skype's value down to what they could sell it for -- a second write-down would be embarrassing, as would taking the write-down, depressing stock prices, and then selling for substantially more than the written-down value.)
If they think that the non-profitable Skype is dragging down the stock price, and anticipate the inevitable write-down will depress the stock price further, then their best bet is to take the write-down, do a share buy-back, and replenish their cash reserve by selling Skype 6-12 months down the road.
Not only do most Americans with bachelors' *not* go to grad school, many don't go to school for engineering. My MBA program was mostly-American. My girlfriend's Masters of Professional Writing program was mostly-American. My ex-girlfriends' JD program was all-American. My friend's PhD in Psychology program was all-American. My other friend's Master's of Education program was all-American.
The interesting question is not "why are there so many non-Americans in grad school," but "why don't engineering programs want/appeal to Americans?
First of all, it's not in their interest to protect their exclusive contract. In Europe, people pick the handset and then the carrier; in the US, it's the reverse. Apple wants to make the US market more like the European one. An unlocked iPhone is key to them accomplishing that. Because of the state of the US market, starting out with an unlocked phone and selling it without a plan isn't currently possible, so Apple had to make a deal with some devil; they chose AT&T.
The simplest explanation is that, even if Apple understands all of the unlocking tools on the market now, it's impossible for them to know the full universe of possible unlocking options that a consumer may choose. Heck, we know for sure that one guy took a soldering iron to his iPhone. There's a pretty good chance that modification interacts poorly with a firmware update, and sooner rather than later.
Apple's firmware update may not expect a specific state on the phone when it's first run. But, it's a safe bet that, at some point in the update, it expects to be able to put the phone in a certain state. Heck, changing the phone's state is the whole point of the firmware. If that state is no longer achievable, then it's possible a firmware update could fail catastrophically. That's just reasonable.
The labels know their existing sales channels are dead. What they want is new sales channels. But they don't want just any new sales channel -- they want channels with customers already built-in. That's how the iTMS succeeded -- many of those customers already had iTunes installed for their iPods. When Apple went to the labels, they could offer exposure in a channel that *already had customers*.
AnywhereCD had an interesting model. Unfortunately, they had no customers. This made them an unattractive channel for the labels. Building customers was thus the challenge, and, frankly, that's hard with major-label content. eMusic spreads virally because it focuses on a market that communicates via informal networks already. Amazon has an intriguing new service because they, like iTunes, bring customers along with them. AnywhereCD couldn't offer that. To that extent, I'd say that the early effort to get top labels was a mistake -- they should've concentrated on more open-minded small labels and tried to build up a user base based on network effects, then tried to grow upwards from there. Of course, I don't know if that would've brought them enough revenues to reach breakeven, but, if new channels must bring customers with them to achieve credibility, then building a customer base before doing the expensive, complex deals was the best idea.
+1 to this. OpenOffice came out in what, 1999? In that time, Apple has managed to develop and release a complete office suite that's innovative in its features and interface; and goodness knows how many independent developers have made Web-delivered suites that offer unique interfaces and enable collaboration. And OpenOffice has added... what exactly? Sure, there have been tons of detail improvements, but nothing that says "use me!" for people who aren't just trying to avoid Microsoft products. It's not just UI, it's not just organization models, it's not even who should or shouldn't be criticizing. It's a big question of "why", and that comes down to vision.
There's also a question of criticality. Car rental companies, for instance, tend to keep their maintenance in-house, while, say, a pharmaceutical company with a fleet of cars for its sales force would tend to outsource a lot of maintenance. That's because the car rental company only makes money off of a car if it's fixed and on the road -- that's their whole business. Similarly, a lot of airlines maintain their own planes but outsource catering.
The problem with SAAS for Windows Update is that basically, a key part of everyone's work for those few days was outsourced, whether or not they wanted it to be. It was as if they outsourced someone turning on the computers every day.
Maybe the lesson here is "outsource things that aren't mission-critical enough for you to do them yourself. Keep the rest in-house."
This is a clever purchase in that it gets Acer access to a bunch of customers who might never have considered it, but I'm tempted to think that they could've gotten the same customers just by having innovative designs.
That's exactly correct. Music companies are stuck between a rock and a hard place. They feared that, if digital distribution took off, they'd lose their ability to set the price of their product, so they pushed DRM. But they failed to understand that the people who made the DRM then controlled the sales channel. It's an understandable mistake, because the channel -- first mom-and-pop music stores, and, later, chains like Tower and the Wherehouse -- never had any strong ability to set their own prices. The recording industry was always more powerful and could even push though large price increases, as happened in the early '90s with CDs.
But the channel turns out to have all of the power in digital distribution, probably because there really is only one channel that works right now (iTunes Music Store). That means that the music companies have lost their ability to set their prices -- just what they feared would happen with widespread DRM-free digital distribution. Eventually, without the ability to set prices, recording companies will be paid a fair price for what they do -- a middling salary that justifies music-lovers staying in roles in which they discover new acts, help produce their records, and contribute marketing knowledge to the album release. The days of Scrooge McDuck-style rolling in money will be over, and who wants that?
Now they've got to make a deal with one devil or the other. Do they keep kowtowing to Steve Jobs, offering tracks for $0.99 that they'd like to sell for $1.49? Or, do they put music out there, DRM-free, in the hopes that they'll break the iTMS's near monopoly? Since the copying/piracy Pandora's Box has already been opened, they really have to choose the latter option.
(It may seem obvious that having more people selling digital music out there would drive down the price paid by the consumer, but in fact that may not be true here. Music is one of those goods where the cost to produce the first unit is $millions and the marginal cost to produce further units is darned near $0. Logically, that means that, once an album has been released, tracks should sell at the highest market-clearing price possible, so long as that price is greater than the marginal cost to produce the track. That market price will be quite low. The recording companies can set an artificial floor by selling to the distributors at a higher price -- for instance, if they sell tracks at $0.89 each, then nobody can sell a track for less than $0.89 and hope to break even. If the recording industry has many channel partners, then no single channel partner may have enough negotiating power to demand that the industry lower its price to closer to the actual marginal cost of $0. However, a single channel partner, such as the iTMS, clearly has enough power to demand that the wholesale price of tracks is kept fairly low -- Jobs can say "keep your price to us low enough that we can make a profit at $0.99, or we just won't sell your track on the only successful online music store.")
We'll see if this works. The big question now is: how much do consumers really value DRM-free music, vs. having a store with a good interface and a fairly complete catalog? And, of course, the big risk is that, once enough DRM-free tracks are out there, Apple will demand to sell DRM-free tracks as well, will use its negotiating power to get its way, and then will kill all of the new DRM-free services by having the same DRM-free music, wrapped in a nice store with a wide selection. Then, the only way for the new stores to compete will be to cut price -- and that will also deprive the recording companies of their ability to set prices.
So, basically, this is a lose-lose proposition for the recording companies. Ain't business fun?
Keep in mind that adding components adds cost, complexity, and, perhaps, size. The trick of product design is to make the right trade-offs in cost, complexity, size, functionality, and other features. A good way to take a first stab at product design is to look at the intersection of people who use feature A and those who use feature B. If the two groups have a lot of overlap, then it's probably a good idea to include both of those features in your product. If the two groups don't have a lot of overlap, then you won't be able to charge group A a premium to get the features that group B would like, and group B won't buy your product at all because they don't want any of the features that you put in to make group A happy. So, in this case, you get the same number of units sold, but you make less money on each unit, because of the cost of the extra hardware for the extra features.
In this case, I think you've identified two groups without much overlap -- iMacs appeal to home users and PC Card slots and drive bays to power users. People who really want things like that probably don't value the small form factor of the iMac -- they want a lot of expandability, with multiple drive bays and expansion slots, like you get in the Mac Pro, or they really want portability, in which case they go for the MacBook Pro, which has both of the features you want.
Draw a few Venn diagrams. See what you end up thinking.
You've got it exactly right -- people listening to internet radio won't just stop and go back to old-fashioned radio. So what's left now? Nothing legal, that's for sure. The music source may not be something as frightening as al Quaeda, but Shawn Fanning kept a lot of people up at night too, for a while.
These are all perfectly reasonable criteria for you to have. However, since you clearly want the least expensive product -- and probably the one on which the manufacturer makes the least profit -- and have no interest in buying any of the content produced for the format, you should not be surprised if no company is rushing to make products that meet your needs until costs go *way* down, probably a matter of years.
The upside is that, by the time products that meet your needs come out, the format wars will be over and you won't have to worry about spending your money on the wrong format. The downside is that, by the time products that meet your needs come out, the format wars will be over and, just maybe, a standard that makes it maximally annoying to burn movies and view burned movies will have won out.
It may or may not be desperate. Every previously-launched game console has had price drops sometime during its life, so it's safe to assume that Sony planned to drop the PS3's price eventually. Presumably, they planned to drop the price when their manufacturing costs came down, which would allow Sony to make the same profit even at a lower price. Two things can drive manufacturing costs down:
Scale, which would allow Sony to both:
Buy components in bulk and save money.
Fully-utilize what are probably pretty automated factories to build the systems. There's a certain amount it costs just to run one single shift at such a factory -- electricity, unavoidable maintenance, staff -- and having more volume allows Sony to distribute these costs across more units shipped.
Learning. The more time Sony and its contractors have spent making components and complete systems, the more efficient they can be, the faster they can make a unit, and the better they'll understand how to make units.
This early on, and with the lack of commercial success the PS3 has had, we're probably seeing more learning effects than scale effects. But that's ok, because early on these can bring big savings. If this is why Sony's cutting prices, it just represents the company moving down a strategic plan hatched long before the console was launched, and is neither "desperate" nor "aggressive," but "business as usual."
Of course, the alternative possibility is that Sony is cutting the price to gain volume, which they anticipate will then allow them to save money from scale and from the experience they'll gain from making more units. This is much more of a gamble, because they're saying "our costs haven't gone down yet, but maybe we can drive them down if we make more PS3s!" This is usually true, but, with this approach, they're betting on a lot of new sales because of the lower price. In this case, "desperate" may not be a bad description.
You're right; Universal's iTunes income is material to their results, while Apple's iTunes income is not. So, from that point of view, Apple will ultimately win -- they always have the alternative of not caring that much if Universal doesn't have their music on iTunes.
So what could Universal possibly want to get out of this? They're either standing fast with little to no leverage -- whining like a baby, basically -- or they're trying to make a statement.
You were being sarcastic, but I think you're exactly right: their statement is "buy us, Apple!" Universal has no idea how to merchandise their catalog, so they'd like to pass that problem on to someone else. Selling their assets could create good return for investors and get the larger company out of the continuous slide in music asset values.
What would be more interesting is if Apple licenses the catalog for distribution, en bloc, as you suggest. Then Universal could continue to develop new acts -- which they seem to think they're good at, true or not -- while not worrying about moving that music through changing and uncertain channels. It's not clear to me what Apple gets out of this, except an antitrust lawsuit down the road, but it's an interesting idea nonetheless.
What an odd way of throwing up one's hands and saying "that's it! I quit!"
That's a totally plausible analysis too. But it's much less fun to make.
Anyway, the two aren't incompatible. If you're dedicated to the long haul, because you love to make music, then there's some evidence that giving away some of your music is a good idea -- look at the Greatful Dead and Phish, just for two obvious examples.
Well, it's Prince's job, so there's a monetary value to him. But he's clearly making the statement that he doesn't see the sale of these albums as of monetary value to him. There's two reasons this might be true:
He makes more money off of touring, or sales of other material
He, like those Communist nutbags at Procter & Gamble, has realized that you can sometimes sell more overall by giving some stuff away. Prince is looking at the whole value of his portfolio of music products and he realizes that he can increase the value of his other assets by giving some of this one away:
Availability of new music may drive traffic to his shows
Perhaps people who would otherwise spend $19.99 (or whatever, in pounds) on this album may spend $19.99 on a Prince t-shirt, on which he may earn more
Availability of free music may develop new fans, who will then create marginal revenue increases across his whole portfolio of music products, especially including his back catalog, which they'll now need to buy for the first time
I tend to think that #2 is particularly true. I've said for a long time that I'd bet the best predictor of whether or not an individual will buy an act's new album is whether or not they have -- not that they bought, just that they have -- that act's last album. If that's true, piracy today creates marginal revenue in the future at some function of the volume of the cost of piracy today, and the economic cost (or value) of piracy to record labels can be more accurately calculated by skilled marketing staffs. But Prince is taking this even further -- he's saying that whether or not someone has -- not buys, but has -- his current album is a strong predictor of whether or not they'll buy his previous albums. Because he's released more than 25 previous albums, possession of the new album doesn't need to be that strong of a predictor for him to break even on the giveaway, just so long as there's some correlation (and causation, of course).
This has interesting implications for other long-established artists. If Prince is right that he'll make more money from back catalog sales than he gives away on this album, then other acts with deep catalogs should consider encouraging piracy of at least some subset of their works, in order to get new fans (I'm looking at you, Rush). This would then, in turn, suggest that the artists who can most benefit from piracy are the oldest, most established artists, and the newest artists whose fan base is too small for them to reach breakeven. The squeezed-out artists would be those who have a couple of hits and a couple of albums out but haven't really proven they aren't yet a flash in the pan.
This is where Apple's design choices pay off, actually. Sure, the AT&T network isn't that fast -- what American phone provider actually has a fast network -- but they work around it in some clever ways. One is to throw away all of the visual presentation that's shipped with certain common Web applications: for instance, the custom YouTube app, which offers both better compression and an interface that doesn't require downloading an HTML page and Flash app to see streaming video; the custom Google Maps app, which avoids shipping all of the HTML and (presumably) Javascript, by implementing the interface in Java; and the LDAP browser shown at WWDC, which provides a pretty interface directly for LDAP servers, rather than requiring people to build Web pages that query these LDAP servers and serve up the desired data. All of this will drastically cut down on the number of bits Apple has to push around to get data to their iPhone. Smart app developers will realize what data formats the iPhone can handle internally and build applications that deliver these, making these applications more responsive for, and thus desirable to, iPhone users.
You're probably completely correct -- it's almost certainly about stockroom and shelf space. But a bigger question is: how serious is this commitment? It's probably not serious at all; Blockbuster already somehow liquidates tens of thousands of surplus DVDs every week. (How many copies of "Failure to Launch" do you think they held on to after that one came off the New Releases shelf?) If they blow this choice, how long do you think it'll take them to completely reverse field and move to HD-DVD only? Two weeks? And what's the amortization on a Blu-Ray movie? I bet, after a discount for buying in bulk, they pay one off in less than 10 rentals. A hollow victory for Blu-Ray, if Blockbuster can really turn around and switch its decision in a month or two.
Anyway, note how the article says HD-DVD titles will still be available online. About what percentage of technology-focused, cutting-edge videophiles do you think go into a Blockbuster to rent the video they consume?
That's fine. I think you've just defined yourself as not in Apple's target demographic -- and Apple as a company that can't possibly deliver something of value to you. (They're not a carrier, after all.) You're better off without each other, and, to any businessperson as well as to any discriminating consumer, that's a perfectly fine outcome.
The Wii makes money on every unit shipped. If the Wii's run only lasts through the end of 2007... Nintendo still has cash to make a next-gen console (with such a short run, it may end up being a bad investment, but it won't be a cash-draining investment). Because the Wii's made from commodity parts, it should get dramatically cheaper as time passes, which means that the price of the system can drop. Didn't the GameCube end at $99 or something? How many people would buy a Wii at $99 in 2009?
By making a system that was profitable out of the gates, Nintendo preserved its options in the future. MS and Sony need to keep producing their systems for years to make back their investment, or write off the investment and try to develop a next-gen system with less cash in the bank. Sony, at least, is relatively cash-poor right now.
And, heck, not only did the Wii get Nintendo cash flow, it also got them headlines, and helped get Kutaragi fired. That's a success by any measure, one that will continue to pay dividends in the years to come, even if the Wii itself is a dead end.
This does beg the question... does "sold" mean "consumer end-users have bought a million Zunes" or does "sold" mean "our channel partners have bought a million Zunes off us, and now have some percentage in consumers' hands, some percentage on store shelves, and some percentage in warehouses"?
I'd wager it's the latter, since that would be more or less standard. So consumers could have bought substantially less than a million Zunes. I wonder what percentage are in consumers' hands? Did any retailers bet on big Zune sales and are now stuck holding large inventories? Have Zunes been moving well off the shelves? I'd love more info.
I'd say that audio has gotten worse in terms of audio fidelity quality, but better in terms of portability quality and convenience quality. Clearly, this is a trade-off that a certain subset of consumers is willing to make. Sure, the new tuner sounds worse but it's got an iPod button; the speakers aren't that great but they're wireless; the broad market seems to prefer convenience and portability over audio fidelity.
(It may also be that the broad market understands how to judge what features deliver what degree of portability and convenience better than they understand how to judge what features deliver what degree of quality. If that's the case, typical consumers may then give up on better audio fidelity, or make purchases that they inaccurately perceive as delivering better audio fidelity).
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I can consistently reproduce the problem -- switch to Windows XP. I've never been able to keep Bluetooth consistently working on my Dell.
While I definitely think this looks like a good match for Yahoo, eBay has $3.1B in cash and short-term investments... that's a reasonable chunk of change. A good question would be "what would eBay do with $1.6B more cash?" (One would presume that eBay would write Skype's value down to what they could sell it for -- a second write-down would be embarrassing, as would taking the write-down, depressing stock prices, and then selling for substantially more than the written-down value.)
If they think that the non-profitable Skype is dragging down the stock price, and anticipate the inevitable write-down will depress the stock price further, then their best bet is to take the write-down, do a share buy-back, and replenish their cash reserve by selling Skype 6-12 months down the road.
Not only do most Americans with bachelors' *not* go to grad school, many don't go to school for engineering. My MBA program was mostly-American. My girlfriend's Masters of Professional Writing program was mostly-American. My ex-girlfriends' JD program was all-American. My friend's PhD in Psychology program was all-American. My other friend's Master's of Education program was all-American.
The interesting question is not "why are there so many non-Americans in grad school," but "why don't engineering programs want/appeal to Americans?
First of all, it's not in their interest to protect their exclusive contract. In Europe, people pick the handset and then the carrier; in the US, it's the reverse. Apple wants to make the US market more like the European one. An unlocked iPhone is key to them accomplishing that. Because of the state of the US market, starting out with an unlocked phone and selling it without a plan isn't currently possible, so Apple had to make a deal with some devil; they chose AT&T.
The simplest explanation is that, even if Apple understands all of the unlocking tools on the market now, it's impossible for them to know the full universe of possible unlocking options that a consumer may choose. Heck, we know for sure that one guy took a soldering iron to his iPhone. There's a pretty good chance that modification interacts poorly with a firmware update, and sooner rather than later.
Apple's firmware update may not expect a specific state on the phone when it's first run. But, it's a safe bet that, at some point in the update, it expects to be able to put the phone in a certain state. Heck, changing the phone's state is the whole point of the firmware. If that state is no longer achievable, then it's possible a firmware update could fail catastrophically. That's just reasonable.
The labels know their existing sales channels are dead. What they want is new sales channels. But they don't want just any new sales channel -- they want channels with customers already built-in. That's how the iTMS succeeded -- many of those customers already had iTunes installed for their iPods. When Apple went to the labels, they could offer exposure in a channel that *already had customers*.
AnywhereCD had an interesting model. Unfortunately, they had no customers. This made them an unattractive channel for the labels. Building customers was thus the challenge, and, frankly, that's hard with major-label content. eMusic spreads virally because it focuses on a market that communicates via informal networks already. Amazon has an intriguing new service because they, like iTunes, bring customers along with them. AnywhereCD couldn't offer that. To that extent, I'd say that the early effort to get top labels was a mistake -- they should've concentrated on more open-minded small labels and tried to build up a user base based on network effects, then tried to grow upwards from there. Of course, I don't know if that would've brought them enough revenues to reach breakeven, but, if new channels must bring customers with them to achieve credibility, then building a customer base before doing the expensive, complex deals was the best idea.
Where else would the natives hide the buggalo?
+1 to this. OpenOffice came out in what, 1999? In that time, Apple has managed to develop and release a complete office suite that's innovative in its features and interface; and goodness knows how many independent developers have made Web-delivered suites that offer unique interfaces and enable collaboration. And OpenOffice has added... what exactly? Sure, there have been tons of detail improvements, but nothing that says "use me!" for people who aren't just trying to avoid Microsoft products. It's not just UI, it's not just organization models, it's not even who should or shouldn't be criticizing. It's a big question of "why", and that comes down to vision.
There's also a question of criticality. Car rental companies, for instance, tend to keep their maintenance in-house, while, say, a pharmaceutical company with a fleet of cars for its sales force would tend to outsource a lot of maintenance. That's because the car rental company only makes money off of a car if it's fixed and on the road -- that's their whole business. Similarly, a lot of airlines maintain their own planes but outsource catering.
The problem with SAAS for Windows Update is that basically, a key part of everyone's work for those few days was outsourced, whether or not they wanted it to be. It was as if they outsourced someone turning on the computers every day.
Maybe the lesson here is "outsource things that aren't mission-critical enough for you to do them yourself. Keep the rest in-house."
This is a clever purchase in that it gets Acer access to a bunch of customers who might never have considered it, but I'm tempted to think that they could've gotten the same customers just by having innovative designs.
That's exactly correct. Music companies are stuck between a rock and a hard place. They feared that, if digital distribution took off, they'd lose their ability to set the price of their product, so they pushed DRM. But they failed to understand that the people who made the DRM then controlled the sales channel. It's an understandable mistake, because the channel -- first mom-and-pop music stores, and, later, chains like Tower and the Wherehouse -- never had any strong ability to set their own prices. The recording industry was always more powerful and could even push though large price increases, as happened in the early '90s with CDs.
But the channel turns out to have all of the power in digital distribution, probably because there really is only one channel that works right now (iTunes Music Store). That means that the music companies have lost their ability to set their prices -- just what they feared would happen with widespread DRM-free digital distribution. Eventually, without the ability to set prices, recording companies will be paid a fair price for what they do -- a middling salary that justifies music-lovers staying in roles in which they discover new acts, help produce their records, and contribute marketing knowledge to the album release. The days of Scrooge McDuck-style rolling in money will be over, and who wants that?
Now they've got to make a deal with one devil or the other. Do they keep kowtowing to Steve Jobs, offering tracks for $0.99 that they'd like to sell for $1.49? Or, do they put music out there, DRM-free, in the hopes that they'll break the iTMS's near monopoly? Since the copying/piracy Pandora's Box has already been opened, they really have to choose the latter option.
(It may seem obvious that having more people selling digital music out there would drive down the price paid by the consumer, but in fact that may not be true here. Music is one of those goods where the cost to produce the first unit is $millions and the marginal cost to produce further units is darned near $0. Logically, that means that, once an album has been released, tracks should sell at the highest market-clearing price possible, so long as that price is greater than the marginal cost to produce the track. That market price will be quite low. The recording companies can set an artificial floor by selling to the distributors at a higher price -- for instance, if they sell tracks at $0.89 each, then nobody can sell a track for less than $0.89 and hope to break even. If the recording industry has many channel partners, then no single channel partner may have enough negotiating power to demand that the industry lower its price to closer to the actual marginal cost of $0. However, a single channel partner, such as the iTMS, clearly has enough power to demand that the wholesale price of tracks is kept fairly low -- Jobs can say "keep your price to us low enough that we can make a profit at $0.99, or we just won't sell your track on the only successful online music store.")
We'll see if this works. The big question now is: how much do consumers really value DRM-free music, vs. having a store with a good interface and a fairly complete catalog? And, of course, the big risk is that, once enough DRM-free tracks are out there, Apple will demand to sell DRM-free tracks as well, will use its negotiating power to get its way, and then will kill all of the new DRM-free services by having the same DRM-free music, wrapped in a nice store with a wide selection. Then, the only way for the new stores to compete will be to cut price -- and that will also deprive the recording companies of their ability to set prices.
So, basically, this is a lose-lose proposition for the recording companies. Ain't business fun?
Keep in mind that adding components adds cost, complexity, and, perhaps, size. The trick of product design is to make the right trade-offs in cost, complexity, size, functionality, and other features. A good way to take a first stab at product design is to look at the intersection of people who use feature A and those who use feature B. If the two groups have a lot of overlap, then it's probably a good idea to include both of those features in your product. If the two groups don't have a lot of overlap, then you won't be able to charge group A a premium to get the features that group B would like, and group B won't buy your product at all because they don't want any of the features that you put in to make group A happy. So, in this case, you get the same number of units sold, but you make less money on each unit, because of the cost of the extra hardware for the extra features.
In this case, I think you've identified two groups without much overlap -- iMacs appeal to home users and PC Card slots and drive bays to power users. People who really want things like that probably don't value the small form factor of the iMac -- they want a lot of expandability, with multiple drive bays and expansion slots, like you get in the Mac Pro, or they really want portability, in which case they go for the MacBook Pro, which has both of the features you want.
Draw a few Venn diagrams. See what you end up thinking.
You've got it exactly right -- people listening to internet radio won't just stop and go back to old-fashioned radio. So what's left now? Nothing legal, that's for sure. The music source may not be something as frightening as al Quaeda, but Shawn Fanning kept a lot of people up at night too, for a while.
Yes, and let's hurry up and do it now, because we're almost out of time!
Oh no, what will the bank think of my new beard?
These are all perfectly reasonable criteria for you to have. However, since you clearly want the least expensive product -- and probably the one on which the manufacturer makes the least profit -- and have no interest in buying any of the content produced for the format, you should not be surprised if no company is rushing to make products that meet your needs until costs go *way* down, probably a matter of years.
The upside is that, by the time products that meet your needs come out, the format wars will be over and you won't have to worry about spending your money on the wrong format. The downside is that, by the time products that meet your needs come out, the format wars will be over and, just maybe, a standard that makes it maximally annoying to burn movies and view burned movies will have won out.
It may or may not be desperate. Every previously-launched game console has had price drops sometime during its life, so it's safe to assume that Sony planned to drop the PS3's price eventually. Presumably, they planned to drop the price when their manufacturing costs came down, which would allow Sony to make the same profit even at a lower price. Two things can drive manufacturing costs down:
This early on, and with the lack of commercial success the PS3 has had, we're probably seeing more learning effects than scale effects. But that's ok, because early on these can bring big savings. If this is why Sony's cutting prices, it just represents the company moving down a strategic plan hatched long before the console was launched, and is neither "desperate" nor "aggressive," but "business as usual."
Of course, the alternative possibility is that Sony is cutting the price to gain volume, which they anticipate will then allow them to save money from scale and from the experience they'll gain from making more units. This is much more of a gamble, because they're saying "our costs haven't gone down yet, but maybe we can drive them down if we make more PS3s!" This is usually true, but, with this approach, they're betting on a lot of new sales because of the lower price. In this case, "desperate" may not be a bad description.
You're right; Universal's iTunes income is material to their results, while Apple's iTunes income is not. So, from that point of view, Apple will ultimately win -- they always have the alternative of not caring that much if Universal doesn't have their music on iTunes.
So what could Universal possibly want to get out of this? They're either standing fast with little to no leverage -- whining like a baby, basically -- or they're trying to make a statement.
You were being sarcastic, but I think you're exactly right: their statement is "buy us, Apple!" Universal has no idea how to merchandise their catalog, so they'd like to pass that problem on to someone else. Selling their assets could create good return for investors and get the larger company out of the continuous slide in music asset values.
What would be more interesting is if Apple licenses the catalog for distribution, en bloc, as you suggest. Then Universal could continue to develop new acts -- which they seem to think they're good at, true or not -- while not worrying about moving that music through changing and uncertain channels. It's not clear to me what Apple gets out of this, except an antitrust lawsuit down the road, but it's an interesting idea nonetheless.
What an odd way of throwing up one's hands and saying "that's it! I quit!"
That's a totally plausible analysis too. But it's much less fun to make.
Anyway, the two aren't incompatible. If you're dedicated to the long haul, because you love to make music, then there's some evidence that giving away some of your music is a good idea -- look at the Greatful Dead and Phish, just for two obvious examples.
Well, it's Prince's job, so there's a monetary value to him. But he's clearly making the statement that he doesn't see the sale of these albums as of monetary value to him. There's two reasons this might be true:
I tend to think that #2 is particularly true. I've said for a long time that I'd bet the best predictor of whether or not an individual will buy an act's new album is whether or not they have -- not that they bought, just that they have -- that act's last album. If that's true, piracy today creates marginal revenue in the future at some function of the volume of the cost of piracy today, and the economic cost (or value) of piracy to record labels can be more accurately calculated by skilled marketing staffs. But Prince is taking this even further -- he's saying that whether or not someone has -- not buys, but has -- his current album is a strong predictor of whether or not they'll buy his previous albums. Because he's released more than 25 previous albums, possession of the new album doesn't need to be that strong of a predictor for him to break even on the giveaway, just so long as there's some correlation (and causation, of course).
This has interesting implications for other long-established artists. If Prince is right that he'll make more money from back catalog sales than he gives away on this album, then other acts with deep catalogs should consider encouraging piracy of at least some subset of their works, in order to get new fans (I'm looking at you, Rush). This would then, in turn, suggest that the artists who can most benefit from piracy are the oldest, most established artists, and the newest artists whose fan base is too small for them to reach breakeven. The squeezed-out artists would be those who have a couple of hits and a couple of albums out but haven't really proven they aren't yet a flash in the pan.
This is where Apple's design choices pay off, actually. Sure, the AT&T network isn't that fast -- what American phone provider actually has a fast network -- but they work around it in some clever ways. One is to throw away all of the visual presentation that's shipped with certain common Web applications: for instance, the custom YouTube app, which offers both better compression and an interface that doesn't require downloading an HTML page and Flash app to see streaming video; the custom Google Maps app, which avoids shipping all of the HTML and (presumably) Javascript, by implementing the interface in Java; and the LDAP browser shown at WWDC, which provides a pretty interface directly for LDAP servers, rather than requiring people to build Web pages that query these LDAP servers and serve up the desired data. All of this will drastically cut down on the number of bits Apple has to push around to get data to their iPhone. Smart app developers will realize what data formats the iPhone can handle internally and build applications that deliver these, making these applications more responsive for, and thus desirable to, iPhone users.
You're probably completely correct -- it's almost certainly about stockroom and shelf space. But a bigger question is: how serious is this commitment? It's probably not serious at all; Blockbuster already somehow liquidates tens of thousands of surplus DVDs every week. (How many copies of "Failure to Launch" do you think they held on to after that one came off the New Releases shelf?) If they blow this choice, how long do you think it'll take them to completely reverse field and move to HD-DVD only? Two weeks? And what's the amortization on a Blu-Ray movie? I bet, after a discount for buying in bulk, they pay one off in less than 10 rentals. A hollow victory for Blu-Ray, if Blockbuster can really turn around and switch its decision in a month or two.
Anyway, note how the article says HD-DVD titles will still be available online. About what percentage of technology-focused, cutting-edge videophiles do you think go into a Blockbuster to rent the video they consume?
"And I don't buy the phone: I buy the plan."
That's fine. I think you've just defined yourself as not in Apple's target demographic -- and Apple as a company that can't possibly deliver something of value to you. (They're not a carrier, after all.) You're better off without each other, and, to any businessperson as well as to any discriminating consumer, that's a perfectly fine outcome.
The Wii makes money on every unit shipped. If the Wii's run only lasts through the end of 2007... Nintendo still has cash to make a next-gen console (with such a short run, it may end up being a bad investment, but it won't be a cash-draining investment). Because the Wii's made from commodity parts, it should get dramatically cheaper as time passes, which means that the price of the system can drop. Didn't the GameCube end at $99 or something? How many people would buy a Wii at $99 in 2009?
By making a system that was profitable out of the gates, Nintendo preserved its options in the future. MS and Sony need to keep producing their systems for years to make back their investment, or write off the investment and try to develop a next-gen system with less cash in the bank. Sony, at least, is relatively cash-poor right now.
And, heck, not only did the Wii get Nintendo cash flow, it also got them headlines, and helped get Kutaragi fired. That's a success by any measure, one that will continue to pay dividends in the years to come, even if the Wii itself is a dead end.
This does beg the question... does "sold" mean "consumer end-users have bought a million Zunes" or does "sold" mean "our channel partners have bought a million Zunes off us, and now have some percentage in consumers' hands, some percentage on store shelves, and some percentage in warehouses"?
I'd wager it's the latter, since that would be more or less standard. So consumers could have bought substantially less than a million Zunes. I wonder what percentage are in consumers' hands? Did any retailers bet on big Zune sales and are now stuck holding large inventories? Have Zunes been moving well off the shelves? I'd love more info.
I'd say that audio has gotten worse in terms of audio fidelity quality, but better in terms of portability quality and convenience quality. Clearly, this is a trade-off that a certain subset of consumers is willing to make. Sure, the new tuner sounds worse but it's got an iPod button; the speakers aren't that great but they're wireless; the broad market seems to prefer convenience and portability over audio fidelity.
(It may also be that the broad market understands how to judge what features deliver what degree of portability and convenience better than they understand how to judge what features deliver what degree of quality. If that's the case, typical consumers may then give up on better audio fidelity, or make purchases that they inaccurately perceive as delivering better audio fidelity).